An Echelon Media Company
Monday February 6th, 2023

Sri Lanka power tariff revisions in Jan and July sought: Minister

ECONOMYNEXT – Sri Lanka’s state-run Ceylon Electricity Board will need another tariff hike to cut losses amid high fuel costs and cabinet approval have been sought for six monthly price revisions. Power and Energy Minister Kanchana Wijesekera said.

A tariff hike granted by the Public Utilities Commission in August was not enough to cover costs, and the agency is still making losses.

“When the CEB said it would cost 850 billion rupees a year to supply electricity based on the coal, diesel and furnace oil prices in April and revenue was only 250 billion rupees, the increase was only 250 billion rupees.

“Even that was not made on the increase in the cost of coal, and fuel. Last January a kilo of coal was 24 rupees. Now 114 rupees. Last January a litre of diesel was 139 rupees now it is 435 rupees.

“Furnace oil was close to 120 rupees, now it 320 rupees. This price increase was not made considering he 3 to 4 times increase in costs.

“Regardless of who opposed it, whoever becomes the line minister, whoever become the President of this country, whoever ran the administration, it is not possible to go forward without revising prices again.”

In 2023, where there is expected to be less rain than this year projected costs were 56.90 rupees a kilo Watt hour and current revenue was only 29.00 rupees a unit.

“There is a shortfall of 27.10 rupees a unit,” he said. “As a whole our generation cost will be 899 billion rupees, but we will get about 400 billion rupees. The CEB will have a 423 billion rupee loss.

“Nobody will give use coal free.”

“We went to cabinet last week asking for the Public Utilities Commission to make this change every January and July 2022.”

He said the steep price revision in 2022 was in party due to the failure of the PUCSL to raise tariffs for 9 years, raising questions about the usefulness of the regulator which had lost brought cost reflective prices.

“If after raising prices in January, costs fall in July due to renewables, then we can lower the price,” Minister Wijesekera said.

In Sri Lanka higher rainfall leads to a fall in costs.

He blamed the PUCSL partly for triggering the current crisis in the power sector by not raising prices for 9 years.

In 2022 however a part of the costs was due to procurement inefficiencies of fuel due to foreign exchange problems.

The key economic problem in post-independent Sri Lanka has been the soft-pegged central bank which have the country’s macro-economists to the power to print money to mis-target interest rates and create forex shortages and currency depreciation through flexible or discretionary policies.

The 2022 currency crisis the worst in its history, but the agency set up the style of Banco Central de la República Argentina in 1950 by US money doctor has busted the rupee from 4.70 to 360 to the US dollar so far.

Under an International Monetary Fund program, a new monetary law is to be enacted to legalize discretionary policies under ‘flexible inflation targeting’ which critics say is perhaps the most deadly impossible trinity monetary regime peddled to third world countries without a doctrinal foundation in sound money. (Colombo/Nov26/2022)

Leave a Comment

Your email address will not be published. Required fields are marked *

Leave a Comment

Leave a Comment

Cancel reply

Your email address will not be published. Required fields are marked *

Sri Lanka Railways to seek PPPs to boost revenue streams

CURFEW RUSH: Commuters scrambling to get home after curfew was declared in Sri Lanka on March 20, 2020.

ECONOMYNEXT – Sri Lanka Railway department hopes to expand Public Private Partnerships and earn more non-passenger revenues to offset recurring operational costs, an official said.

“For the past 10 years, except the last few years, the Railway operational income only covers around 50 percent of the operational expense of the Department,” the General Manager of the Railway, D.S. Gunasinghe told EconomyNext.

“Our plan is to increase the non-passenger revenue of the Railway department.

“And we cannot expect and do not hope for money from the government.”

Sri Lanka Railways already has agreements with Prima, a food firm, and Insee Cement, which is bringing in additional income, Gunasinghe said.

“We had agreements for material transportation such as sand in the past, however it was canceled but we hope to start it again” he said.

The department will rent out its storage facilities and circuit bungalows for the tourism sector to create additional revenue streams.

Sri Lanka Railways recorded an operating loss of 10.3 billion rupees during 2021, compared to a loss of 10.1 billion rupees in 2020, the Central Bank 2021 annual report showed.

The total revenue of the SLR stood at 2.7 billion rupees, a 41.3 percent drop from a year ago.

(Colombo/ Feb 06/2023)

Continue Reading

Sri Lanka’s doctors distribute anti-tax hike leaflets to train commuters

ECONOMYNEXT – Doctors representing Sri Lanka’s Government Medical Officers Association (GMOA) distributed leaflets outside the Colombo Fort railway station against a progressive tax hike, threatening to address the government in a “language it speaks”.

GMOA Secretary Haritha Aluthge told reporters outside the busy Fort railway station Monday February 06 afternoon that all professional associations have collectively agreed to oppose the personal income tax hike.

“The government is taking a lethargic approach. They cannot keep doing this. They have a responsibility towards the citizens, the country and society,” said Aluthge.

The medical officer claimed that the government was acting arbitrarily (අත්තනෝමතික).

“If it cannot understand the language they’ve been speaking, if the government’s plan is to put all professionals out on the street, if it doesn’t present a solution, all professional unions have decided unanimously to address the government in a language it speaks, ,” he said.

Aluthge and other GMOA members were seen distributing leaflets to commuters leaving the railway station. Doctors in Sri Lanka in general are likely to earn higher salaries than the average train commuter, and a vast majority of Sri Lanka’s population, most of whom take public transport, don’t fall into the government’s new tax bracket. Many doctors, though certainly not all, collect substantial sums of money at the end of every month as doctor’s fees in private consultations.

About two miles away from the doctors, the Ceylon Blank Employees’ Union, too, engaged in a similar distribution leaflet campaign on Monday at the Maradana railway station. A spokesman promised “tough trade union” action if there was no solution offered by next week.

Sri Lanka’s cash-strapped government has imposed a Pay As You Earn (PAYE) tax on all Sri Lankans who earn an income above 100,000 rupees monthly, with the tax rate progressively increasing for higher earners, from 6 percent to 36 percent.

A person who paid a tax of 9,000 rupees on a 400,000 rupee monthly income will now have to pay 70,500 rupees as income tax, the latest data showed. This has triggered a growing wave of anti-government protests mostly organised by public sector trade unions and professional associations.

Even employees of Sri Lanka’s Central Bank recently joined a week-long “black protest” campaign organised by state sector unions against the sharp hike in personal income tax, even as Central Bank Governor Nandalal Weerasinghe said painful measures were needed for the country to recover from its worst currency crisis in decades.

The government, however, defends the tax hike arguing that it is starved for cash as Sri Lanka, still far from a complete recovery, is struggling to make even the most basic payments, to say nothing of the billions needed for public sector salaries.

Economists say Sri Lanka’s bloated public service is a burden for taxpayers in the best of times, and under the present circumstances, it is getting harder and harder to pay salaries and benefits.

Sri Lanka’s new tax regime has both its defenders and detractors. Critics who are opposed to progressive taxation say it serves as a disincentive to industry and capital which can otherwise be invested in growth and employment-generating business ventures. Instead, they call for a flat rate of taxation where everyone is taxed at the same rate, irrespective of income.

Others, however, contend that the new taxes only affect some 10-12 percent of the population and, given the country’s economic situation, is necessary, if not vital, at least for a year or two.

Critics of the protesting workers argue that most of the workers earn high salaries that most ordinary people can only dream of, and, they argue, though there may be some cases where breadwinners could be taxed more equitably, overall, Sri Lanka’s tax rates remain low and are not unfair.  (Colombo/Feb06/2023)

Continue Reading

Sri Lanka bond Yields end steady

ECONOMYNEXT – Sri Lanka’s bond yields closed steady on Monday, dealers said while a guidance peg for interbank transactions remained unchanged.

A bond maturing on 01.07.2025 closed at 32.15/30 percent, steady from Friday’s 32.05/10 percent.

A bond maturing on 01.05.2027 closed at 28.90/29.10, steady from Friday’s 28.90/20.05 percent.

The Central Bank’s guidance peg for interbank US dollar transactions appreciated by one cent to 361.96 rupees against the US dollar.

Commercial banks offered dollars for telegraphic transfers at 370.35 rupees on Monday, data showed. (Colombo/Feb 06/2023)

Continue Reading